Debt Collection

A debt is “in collection” after the lender or creditor determines that it has not been paid or not paid on time. Typically, a debt collector is a third party that has been assigned or purchased your account from the original lender or other creditor. Today, with the COVID-19 crisis, many consumers will face these attempts to collect a past due debt. You have certain rights you should know that can help you get past these hardships.


When you do not pay a bill, there are several ways the creditor or debt collector can try and make you do so.

1. A debt collector can call or write you and ask for (or demand) payment. If you would like to speak with a collector, you can of course choose to do so. However, you never have to. This is true no matter how aggressive, threatening or demanding a collector may act. Instead, you can simply write to the collection agency and plainly state that you do not want any further contact. If you do that, the debt collector is no longer allowed to contact you.

2. A debt collector can sue you in court. This is usually an option, though many collectors often threaten suit, but do not follow through. Regardless, today, during the COVID-19 emergency, most courts have closed. Most lawyers are working remotely. Collectors are not “essential services” and are limited in what they can do outside their homes. The collection industry is also aware of their poor image and has suggested to its members to defer collection suits during this hardship period.

3. Your credit may be harmed. When an account is reported to your credit report as “in collection”, this is harmful to your credit and credit score. However, the worst impact that a collection account will have on your score is the first day that it is reported. Every day that passes incrementally improves your credit, even without paying a collection account. And at this time, if your credit is already damaged, the payment of one collection account is not going to have a meaningful effect. Additionally, a partial payment or payment plan on a collection account has no beneficial effect on your credit as the debt collector does not report payments or a reduced balance.

Those are the three things that can happen to you from a debt collector. None of them are going to be as important as maintaining your basic life and household. Typically, debt collection payments should be one of the first things you stop or defer. Your family’s food, housing and utilizes should come first.


How does debt collection work?

Debt collection often begins with a debt collector contacting you by phone or by mail stating that you owe a debt and that they are trying to collect on it. Often times, consumers do not recognize the company that has contacted them, even if they recognize the underlying debt. This is because many debt collectors buy the right to collect on a debt that originated somewhere else and then try to collect the debt.

Some debt collectors may only call you or mail you letters. If you receive only a telephone call, do not pay any money unless you also receive a letter. If you receive a letter, you can request that the debt collector validate the debt. You must dispute the debt or seek verification of the debt within 30 days.

Others may file a lawsuit against you to obtain a court order that you must pay the debt. If you are sued, it’s important to remember that you can contest the debt in court as well as raise your own claims against the debt collector. It is highly recommended that you contact an attorney if and when you find out that you are being sued.

If the debt collector prevails in a lawsuit against you, it may ask the Court to garnish your wages or seize assets you own to pay off the amount in the judgment. State laws on what can and cannot be garnished vary widely, thus you should consult an attorney in your state.


How do I know if the call/email/letter is a scam?

Some debts are legitimate, but are being collected in an illegal manner. Other “debts” are illegitimate, made up or cannot be lawfully collected.

Even if you owe a debt, there is no excuse for aggressive or threatening debt collectors. Many are attempting to sell you on the idea of making a payment on a collected debt. Do not feel intimidated and do not be persuaded. If it makes sense to you, in your budget, to make a payment on a debt you know you owe, you may do so by your choice. But if a debt collector threatens you, sounds angry or hostile or seems at all shady – just tell the collector that you are hanging up and do not want further contact. Write a letter and take a photo of your caller ID. You remain in charge; not the debt collector.

In addition to the collection of legitimate debts you may owe, you should also be aware that there are scammers out there who will try to trick you to get you to pay on a debt you don’t owe or on debts that don’t exist. Here are some warning signs:

  • You receive only a telephone call or telephone message, without any written communication from a debt collector. Debt collectors are required by federal law to provide written notice to consumers of their rights. They must send you a written notice within five days of your first communication. That notice must include the amount of the debt, the name of the current creditor, that you have 30 days to dispute the debt, and a notice telling you that you have the right (upon request) to the name and address of the original creditor. If you do not receive this letter, it is a good indicator that the telephone call was a scam.
  • Withholds information from you. Debt collectors are required to tell you the name of the creditor, the amount owed, and to give you the notices above.
  • Request payment by money transfer or prepaid card.

For more information, see here.


COVID-19 and debt collection

Various courts throughout the country have postponed cases due to the Coronavirus. If you have already been sued by a debt collector, contact the court to determine if your case has been continued.

The trade group that represents debt collectors has also implemented procedures to assist consumers affected by COVID-19. More information regarding these procedures and how to request hardship assistance can be found here.


What can you do if you’re facing debt collection?

Under the Fair Debt Collection Practices Act, you have the right to dispute the debt, request validation of the debt, and to tell the debt collector to stop contacting you. To invoke these rights, you generally will need to send a written letter to the debt collector. Please see the resource section for more information on doing so. Below are sample letters that you can modify and send to debt collectors:

If you currently have an outstanding judgment entered against you and are worried about your economic stimulus (under the CARES Act) being garnished, you can try the following: (1) withholding direct deposit information from the IRS (if it does not already have such information) so that you are issued a paper check, (2) withdrawing stimulus funds as soon as deposited, and (3) seeking an emergency stay of any garnishment order (consult with an attorney regarding this option). More information can be found in the resources section at the bottom of this page.



Here are some additional tips to consider if you are facing debt collection:

  1. If you do not recognize the debt, request the debt collector send you validation of the debt.
  2. Keep records of all communications with the debt collector, both communications you send as well as those you receive, and all telephone calls.
  3. Be on the lookout for any lawsuit filed against you. You will want to keep track of court dates. If you are sued, consult with an attorney. Always go to court if you have a hearing.
  4. Review your sources of income and assets to determine if any are exempt from collection.
  5. Be wary about paying anyone upfront fees who promises to reduce the amount you owe in debts.


What rights or protections do I have if I’m facing debt collection?

You have rights under federal law that protect you as a consumer from harassing debt collection practices. This law is the Fair Debt Collection Practices Act. For example, this law protects you from debt collectors who lie to you, use abusive language in communicating with you, as well as those who fail to provide you proper notice of your rights. This law also allows you to request validation of the debt before a debt collector can continue to attempt to collect a debt from you. Keep in mind that this law applies exclusively to consumer debt, and that the vast majority of restrictions apply only to a third-party debt collector that contacts you.

You may also have additional rights under your state’s laws. For example, California has enacted the Rosenthal Fair Debt Collection Practices Act to provide additional protections to consumers. Check your state’s laws to see what additional protections are available.

You may also have legal defenses to debt collection. As an example, time limits, called statutes of limitations, control when lawsuits can be filed. Depending on how old the debt is and when you last made payment on it, possibly the statute of limitations has expired. Statutes of limitations vary by state, so consult with an attorney in your state to determine if this defense is applicable to debt collection you are facing.

Even if a judgment is entered against you, certain assets and sources of income are protected by federal and state law. For example, federal law protects disability payments from being taken from you. As another example, different states specify a certain dollar amount of your assets are exempt from collection. Given that such protections vary by state, speak with an attorney in your state.


Miscellaneous Information

Special Types of Debt

Student Loans
Student loan protections vary based on the type of loan, such as if it is a federal loan or private loan, and also what year the loan was taken out. The tools available to debt collectors also vary by loan. Please see our section on Student Loans to learn more about such loans.

Medical Debt
You may have additional protections if you are facing debt collection from medical debt. If such debt was incurred by a hospital, the hospital may provide some procedure to manage payment plans or appeal the amount owed. See the Additional Resources section to learn more about addressing medical debt.

There are additional laws that govern mortgages and what happens if you fall behind on payments. Please see the Mortgages section to learn more.

Secured Debt (ex. Car Loans)
For some loans, you may have agreed to provide collateral to obtain the loan. Or you may have purchased an expensive item, such as a car, through a loan. Additional protections are available to you for certain collection activities, such as repossessions. Because these laws vary by state, consult with an attorney in your area if this situation applies to you. For more information about auto loans, visit the Auto Loans page.


Impact on Credit Reports

A debt collector may report the debt about you to credit reporting agencies. Such information can have a significant negative impact on your credit report. If you do not recognize the debt or believe inaccurate information is being reported, you have rights under federal law to fix this information. Please see the Protecting Your Credit section learn more.


Debt Settlement Companies

Some companies will advertise that they can reduce the amount you owe in debts. Exercise caution when considering using such services. You may incur additional fees to these companies, as well as ultimately end up owing more money to the debt collector. Please see the Additional Resources section below for more information about debt settlement companies.


Additional Resources

Below are some additional resources to learn more about debt collection and your rights as a consumer. Sources include Consumer Financial Protection Bureau (CFPB), National Consumer Law Center (NCLC), National Association of Consumer Advocates (NACA), and the Federal Trade Commission (FTC).

  1. COVID-19 and Debt Collection (CFPB):
    1. Sample Letters
      1. Disputing a debt
      2. Do not contact
      3. Request more information
  2. Debt Collection Overview (NACA):
  3. Debt Collection FAQs (FTC):
  4. Stop Debt Collection Harassment (NCLC):
  5. Dealing with Medical Debt (NCLC):
    1. Hospital Debt:
  6. Wage Garnishment and Bank Account Seizures (NCLC):
  7. Debt Settlement Companies (NCLC):
  8. Protecting Stimulus Checks from Garnishment (National Consumer Law Center):